Since the latter half of 2008, both short-term and long-term Treasury rates and the effective federal fund rate are at historic lows (Exhibit 5). Should a broad-based economic recovery take shape, interest rates would be expected to go up at some point. Elevated inflationary expectations would also cause interest rates to rise. Both of these effects would positively affect bank loan returns. Current pricing levels for bank loans do not appear as attractive as they were at the end of 2008, but have gone back to the much lower end of historical average prices, which ranged between $ and.
